Blacks Retail Report

Luxury Apparel
December 2006

Table of Contents

The Big Picture
In The Bag
Fall Ahead
Blacks Bottom Line

The Big Picture

As the year winds down, the U.S. economy is showing mixed signals. Consumer spending increased by 0.5% in November and inflation appears in check, yet producer prices have surged. Energy prices have also inched back up from their earlier lows, increasing transportation costs.

For 2007, economists are predicting a slight deceleration in the U.S. economy.

In the better apparel market, December sales have trended up in the single digits, but are not registering the same kind of growth we saw around Thanksgiving weekend. Apparel retailers are doing well because they have increased their price points and are selling more luxury products. The jewelry market has been even more challenged, with traffic down and fewer sales of big diamonds.

That said, the December calendar is setup to produce strong sales on the weekend of the 23rd. It could be the biggest shopping day of the year and the warmer weather should help.

The big box retailers have already started taking markdowns to drive traffic, so you'll want to keep an eye on what they are discounting and take the appropriate actions to stay competitive.

It also looks like gift certificates will be popular this year, but keep in mind that these sales probably won't show up on your December books.

In The Bag

In men's, the top sellers so far have been fine knits, such as cashmere and merino wool sweaters, and luxury outerwear.

In women's, dresses and skirts continue to sell and we've seen a real surge in women's dressy shoes, particularly boots and heels. Women are buying for themselves as well as making gift purchases, so this segment of the market should do well this season.

Fall Ahead

With Christmas nearly wrapped up, retailers are looking to next fall and reviewing their best sellers from last season. Blacks recommends buying a larger percentage of luxury items since they were the clear winners of fall '06. We also foresee a further merging of jackets and outerwear into a single item. Finally, we believe knitwear will be a key buy for fall '07 and expect to see even more Italian vendors entering this attractive market.

As you look ahead remember that the early markdown is the cheapest. If you are taking markdowns only at point of sale you'll want to move to taking hard markdowns against your inventory. Don't let unsold items eat up your open-to-buy (OTB) dollars.

Blacks Bottom Line

Start taking markdowns on the floor to insure that you'll have OTB for spring.

Retail Report